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Jeff Jacob On Distressed Debt Investing: NYSSA Conference

Detailed notes of Jeff Jacob, Senior Managing Director, Marathon Asset Management from the NYSSA Ben Graham annual conference which took place on Wednesday, June 27th 2018 in New York stay tuned for much more. Right now we have about 30 pages of notes from the full day conference featuring Rich Pzena, Murray Stahl,Thomas A. Russo, Jason Karp, Christopher C. Davis, Jim Grant and many others. [timeless] Q2 hedge fund letters, conference, scoops etc [caption id="attachment_2056879" align="aligncenter" width="664"] Image source: cfany.org/Screenshot[/caption]   [00:00:00-00:00:24 miscellaneous] [00:00:24] Male 1: Hi everyone, it’s my pleasure to introduce our final key note Jeff Jacob the senior managing director of Marathon. He does Marathon’s corporate credit business and is a member of the executive committee. He serves as portfolio manager for Marathon in special situation portfolios. He joined Marathon after 8 years with Arch View as credit manager in 2009 where he served as chief investment office and become a managing partner. Prior to managing Arch View he was the founding member and head of Citigroup's global special situations group managing $3.7 billion in assets in North America, Latin America and Europe. He was previously head of Citi Group’s distressed trading group, he served on the fixed income and commodity management committee and the fixed income diversity committee. Prior to that he spent 7 years at Merrill Lynch as head of distressed trading and ran the South East Asia distressed trading business in Hong Kong. Please join me in welcoming Jeff Jacob. [00:01:26] Jeff: So thanks for having me. I was delighted to be invited here today as a distressed investor you don’t get the chance to talk at conferences very often these days. I was delighted at the invitation, I got the conference material and realised that the theme of the conference was exactly what I do, it’s kind of like giving the eulogy at your funeral. Anyway I’m asked to give a little bit of perspective on finding value in this environment of low rates and perceived low risk from a high yield distressed perspective. I’ve been involved in distressed investing for 25 years now, I started at Merrill Lynch back in the early 90’s. I quickly gravitated to the high yield department and then the newly formed distressed trading business. I was a fundamental credit analyst by the training of background and I was really drawn to the deep fundamental research, intrinsic value aspect, investing in capital structures through the dip at discount, sometimes at pennines on the dollar to add value through that market capital structure. From my perspective at that time, and I still hold this belief, I really feel like distressed investing is the quintessential value investing strategy. I think a distressing strategy or a distressed strategy is that involved, buying debt and creating and unlocking value through a bankruptcy process using contract law assisted by bankruptcy law. It really actually does incorporate a lot of the critical elements that Ben Graham actually used to describe originally value investing. Investing in distressed is by definition contrarian. I think that involved investing based on a market of safety using fundamental analysis to find intrinsic value, to use the law to drive a process on that value. Obviously it is a long term strategy, distressed or bankruptcies take years to unfold they don’t happen in weeks, months or quarters. So you have to be a long term investor but you also have to be able to display a critical element of the Graham got approach to value investing. That’s having the discipline to exercise patience and be able to learn to do...
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